A Step by Step Guide on How the Banks Committed Massive FraudPosted on January 24, 2014 by
By this time, most people are at least aware that mortgage banks were less than honest in how they created and sold mortgage backed securities over the last 15 years. It has driven a lot of negative sentiment towards the banks since the housing market crashed in late 2007, but very few people have a clear understanding of exactly what the banks did. That is completely understandable because the banks set up an extremely convoluted system of fake transactions specifically to avoid people catching on to what they were doing. In this article I am going to attempt to break it down into simple terms.
As the housing market heated up in the early 2000s, investors began to invest in what are known as mortgage backed securities. These are securities that consist of large pools of mortgages. The idea behind these investments was to capitalize on the housing boom while minimizing their risk.
In order to do this, investors had to work through brokers who compiled mortgages into securities on the investors’ behalf.
The way the investors would invest in these funds was to use their money to fund a trust that would acquire mortgages either by originating them as the lender, or by purchasing existing mortgages. In a perfect world, the trust itself would then be the lender or purchaser designated on the mortgage.
Well the investment brokers had other ideas. They took the money from their investors, but never used it to create the trust. Instead the brokers took the money, kept some as payment for bogus transaction fees, and used some of it to directly originate or purchase loans. On the loans made using the investors’ money the brokers designated a completely unrelated third party that they owned or controlled as the lender or purchaser. The broker then sold these loans from the third party to the original trust.
The broker used a bogus third party to sell loans that the investor already owned to a trust that was never funded in the first place and collected the profit.
You might think this is nefarious enough, but the brokers didn’t stop there. They knowingly included high risk mortgages in the securities in order to charge higher interest rates, but then labeled the securities as A+ investments. They then used the bogus third party designated as the lender to take out insurance policies on the loans. So the brokers labeled garbage investments as gold, sold them at inflated prices, and collected insurance on the loans that they had no claim to when the loans defaulted.
All of this is happening behind the scenes when a homeowner buys a house and gets a mortgage, but what does it mean for the homeowners? Are they going to get a free house because the banks lied? In most cases, no. However, it does provide homeowners with ammunition to go at the banks and demand to know who should be getting paid for the loan, and if they have already been paid for it through the various insurance policies that were put on their mortgage.
What does this mean for real estate investors? It means we have a GIGANTIC opportunity sitting in front of us. There has never been a better time to buy defaulted notes. Banks are more willing than ever to sell these defaulted notes not only because it means immediate cash in their pockets, but it also takes away the possibility of a future lawsuit.
If you know of anyone with a defaulted note, you need to get in contact with my office immediately at (706)-485-0162. I have spent the last 22 months building up a team of experienced attorneys and fraud examiners/forensic auditors who specialize in exposing exactly this sort of fraud and negotiating the sale of notes.
We have a huge opportunity to help homeowners and do some great deals with multiple exit strategies by exposing this unbelievable and blatant fraud. We finally have the leverage we need to get the banks negotiating on our terms. It doesn’t matter if the homeowner has already been foreclosed on, we might be able to help.
If you would like more information on this awesome strategy, give my office a call at 706-485-0162!